Light in the trade data
Those who see in CARICOM the causes of Jamaica's economic woes, or rail against the Government's fiscal-containment and exchange-rate adjustment strategies and IMF impositions that can only spell ruin, may wish to have a close look at the Statistical Institute of Jamaica's latest data on visible trade.
They cover the first 11 months of 2014 and reveal that during that period, Jamaica's trade deficit of US$3.93 billion had improved by 4.1 per cent, compared to the corresponding period in 2013. In other words, the country would have had, for that period, to find US$170.5 million less to close the trade gap than it did for the same period the year before. That is good news, but not the whole story. The better part lies in the interpretation of the data - the cause and effect.
The bad news, of course, is that exports declined by 7.5 per cent, or around US$109 million, to US$1.34 billion, during this review period. And worse is that in the non-traditional sectors, which include manufactures and processed foods, exports dipped nearly 17 per cent. The approximately US$19.1 million gain in 'traditionals' was not sufficient to offset the US$11.4-million slippage in the other areas.
But that decline in non-traditional exports, we argue, and the island's manufacturers increasing support, partly mask the larger picture of bright potential. First, there is an inevitable time lag between economic reforms and when business confidence translates to investment and increased production. Recent surveys indicate that business confidence is on the rise. Some domestic investments have begun to take place, but not, as yet, at a pace and depth to be transformative.
The less obvious, or least commented on and not as easily measurable, effect of the more than 20 per cent depreciation of the Jamaican currency over the past two years, however, is what it has meant for import substitution and kick-starting domestic production.
Indeed, while lower prices contributed to the decline, the fact that devaluation makes it more expensive, in Jamaican-dollar terms, to buy from abroad, helped in a five per cent, or US$280-million downward, movement in the value of imports. Food imports fell 16 per cent. Significantly, as William Mahfood, the CEO of Wisynco Group and the new president of the Private Sector Organisation of Jamaica, has been telling those who will listen, the prospect for import substitution has caused a revving up at his factories and a pouring of capital into his enterprises.
Just as encouraging is what has happened in CARICOM (Caribbean Community), that single-market arrangement among regional countries, from which the critics say Jamaica should withdraw because it runs a big trade deficit with the Community. This country still does badly on the score, although the trade deficit up to last November, of $637.7m benefiting in part from lower oil prices, was down 16 per cent.
A very encouraging development was the US$8.4-million increase in exports to the region to a still not overly impressive US$82 million - a gain small on dollar terms, but in percentage terms, a significant 11.4 per cent rise. For the first time in a decade, Trinidad and Tobago's non-oil exports to Jamaica retreated and Port-of-Spain was on Kingston's top 10 list of importing countries. These numbers hint at what is possible if we stop the squealing and get on with prudent policies.